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California Foreclosure Laws
Foreclosures in California are both Judicial (throygh Court) and Non-Judicial (provate, out of Court). Almost ALL residential foreclosures in California are non-judicial. The rare time that a Judicial foreclosure is used by a lender is usually when: (1) the property being foreclosed upon has little value relative to the Deed of Trust amount; (2) a Judicial foreclosure is legally permitted (see below); and (3) the debtor has other property/assets that make seeking a deficiency balance judgment worth the cost and effort.
Non-Judicial, out-of-court foreclosures take about four months to complete. The clock starts ticking from the time a Notice of Default is sent (See: Foreclosure Timeline).
Q. Are Judicial Foreclosure Available in California?
A. Yes (but Judicial foreclosures are expensive and time-consuming)
Q. Are Non-Judicial Foreclosure Avalailable in California?
A. Yes (and it is the universally preferred form)
Q. Is there a Right of Redemption in California?
A. Generally Not.
Q. Are Deficiency Judgements Allowed in California?
A. For Judicial Foreclosure: Yes. Exception: NOT for Purchase Money Deeds of Trust
A. For Non-Judicial Foreclosures: No
Judicial Foreclosure
The judicial process of foreclosure, which involves filing a lawsuit to obtain a court order to foreclose, is used: (1) when no power of sale is present in the mortgage or deed of trust; or (2) when the lender wants the possibility of recovering a deficiency judgment personally against the debtor. Generally, after the court declares a foreclosure, the home will be auctioned off "on the Court House steps" to the highest bidder.
Using this type of foreclosure process, lenders may seek a deficiency judgment and under certain circumstances, the borrower may have up to one (1) year to redeem the property.
Non-Judicial Foreclosure
The non-judicial process of foreclosure is used when a power of sale clause exists in a mortgage or deed of trust. A "power of sale" clause is the clause in a deed of trust or mortgage, in which the borrower pre-authorizes the sale of property to pay off the balance on a loan in the event of the their default. In deeds of trust or mortgages where a power of sale exists, the power given to the lender to sell the property may be executed by the lender or their representative, typically referred to as the trustee.
Power of Sale Foreclosure Guidelines
The non-judicial power of sale foreclosure ("private foreclosure" is carried out as follows:
A Notice of Sale must be: 1) recorded in the county where the property is located at least fourteen (14) days prior to the sale; 2) mailed by certified, return receipt requested, to the borrower at least twenty (20) days before the sale; 3) posted on the property itself at least twenty (20) days before the sale; and 4) posted in one (1) public place in the county where the property is to be sold. The Notice of Sale must contain the time and location of the foreclosure sale, as well as the property address, the trustee's name, address and phone number and a statement that the property will be sold at auction.
The borrower has up until five days before the foreclosure sale to cure the default and stop the process. The sale may be held on any business day between the hours of 9:00 am and 5:00 pm and must take place at the location specified in the notice of sale. The trustee may require proof of the bidders ability to pay their full bid amount. Anyone may bid at the sale, which must be made at public auction to the highest bidder. If necessary, the sale may be postponed by announcement at the time and location of the original foreclosure sale.
Lenders may not seek a deficiency judgment after a non-judicial foreclosure sale and the borrower has no rights of redemption.
Stopping Foreclosure:
• Reinstatement: Pay the amount due, to stop the process
• Repayment Plan: Ask the lender to negotiate a repayment plan
• Loan Restructuring: Ask the lender to restructure the loan
• Loan Refinance: Refinance the debt with a different lender
• Sell: Sell the prperty before the foreclosure is completed
• Short Sale: (when the property is worrth less than the outstanding loan balance)
• Deed-in-lieu of Foreclosure: Give the lender a Grant Deed in lieu of completing foreclosure
(Not recommended)
• File Bankrutcy: An automatic stay under Section 362 at least temporarily stops foreclosure
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